Week of 17 January 2022
Companies and financial institutions: It’s time to step up on climate change by committing to end deforestation and related human rights risks in your supply chains and portfolios
Our key takeaway: Commodity-driven deforestation = contributes to global warming. We know this, yet too few companies and financial institutions linked to deforestation in their supply chains and investments are making robust commitments on deforestation and related human rights risks. This is threatening progress to combat global climate change and drive the just transition.
In its eighth edition of The Forest 500, NGO Global Canopy benchmarks the policies, performance and disclosures of the “350 most influential companies and 150 financial institutions linked to deforestation in their supply chains and investments”:
- Companies are not toeing the line on commitments to address deforestation and deforestation-related human rights risks: Global Canopy found that 72% of the companies assessed do not have a deforestation commitment for all the forest-risk commodities in their supply chains, and around one-third of companies have no deforestation commitment at all. Global Canopy also reports that none of the companies have a “comprehensive approach” to human rights in their supply chains, including commitments on labour rights, gender equality, smallholders, the right to remedy, the right to free, prior and informed consent, and a policy to avoid land acquisition and development in case of land conflicts. Only one company (Nestlé) has made a commitment to each of these human rights areas for all their forest-risk commodities, while 34% of companies have no human rights commitments for any of their commodities. The report spotlights performance in the food sector, where deforestation is a key issue in soy, beef and palm oil supply chains: among agri-commodity businesses, top performers on strength of deforestation commitments and reporting include Amaggi, Cargill, Louis Dreyfus and Archers Daniels Midland.
- The finance sector is trailing companies on commitments to deforestation and human rights and on reporting: The 150 financial institutions assessed “provided more than US$5 trillion in finance to companies in forest-risk supply chains.” However, 62% of these institutions (responsible for US$2.6 trillion in financing to companies with high deforestation risk) do not have a deforestation policy applying to the companies in their portfolios. Global Canopy also finds that financial institutions are lagging behind companies in their human rights commitments: 26% have a policy on free prior and informed consent for at least one commodity, 9% have a policy on gender equality for at least one commodity, and 4% have a policy on land conflicts. In terms of reporting, only 23 of the financial institutions with a deforestation policy reported on their progress towards implementing their policy.
- Recommendations for Forest 500 companies and financial Institutions: Global Canopy issues three core recommendations for the private sector: first, companies and financial institutions should “set and implement strong deforestation commitments and policies, covering deforestation, conversion, and associated human rights abuses” second, they should “join multi-stakeholder efforts to raise awareness”; and third, they should work to “enable cross sector collaboration.”